Carlsberg committed to Russia despite struggling for profit

Carlsberg remains committed to Russia, according to the Danish brewer's outgoing chief executive, despite continued turmoil in its biggest market once again taking the sheen off strong performance in western Europe and Asia.

Jorgen Buhl Rasmussen, who will step down as Carlsberg's chief executive in May, said the brewer's first-quarter results were "more of the same story" with strong performance in western Europe and Asia overshadowed by weakness in Russia and Ukraine.

But he stressed that Carlsberg had no plans to leave the Russian market. "It's a strong desire whether you talk to top management or the supervisory board to keep the Russian business strong, to make sure we do benefit when the market finally turns around."

Carlsberg's woes in Russia serve as one of the main cautionary tales for multinational businesses about the risks of investing too much in one single emerging market. Since gaining full control of Baltika, Russia's leading beer brand, in 2008 just as Mr Rasmussen took charge, Carlsberg has suffered a slew of problems.

Heavy regulation and increased taxation in Russia crimped sales for years before an economic decline sparked by western sanctions over Crimea further hurt Carlsberg in 2014.

Mr Rasmussen, however, insisted that there was some optimism to be had over Russia despite it "sadly" only accounting for about a fifth of earnings at the brewer, down from almost a half when Carlsberg bought out its joint venture partner Scottish & Newcastle in 2008.

"It used to be a much bigger issue in those days. That smaller relative importance of the key market Russia means it should be less of a concern, and some could argue more of an opportunity going forward when it finally turns around," Mr Rasmussen said.

Shareholders in Carlsberg were unimpressed with first-quarter results, sending the shares down nearly 5 per cent. The Danish brewer's operating loss in eastern Europe widened from DKr8m a year ago to DKr155m in the first quarter as it sold 16 per cent less volume. At group level, revenues rose by 4 per cent to DKr13.4bn in the relatively unimportant first quarter while operating profit jumped 46 per cent to DKr661m, boosted by currency gains.

Carlsberg maintained its guidance for 2015 of a rise in underlying operating profits of mid to high single digit percentage.

Mr Rasmussen, who will be replaced on June 15 by Cees 't Hart, chief executive of Dutch dairy group Royal Friesland Campina, said that Carlsberg was currently attempting to make its organisation more agile as well as implementing zero-based budgeting. He repeated that M&A was "not a top priority" even in Carlsberg's new growth region of Asia with organic expansion favoured instead.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation